11-1

11-1

Placement - Overview
• Placement (transference of
goods/services from point of origin
to point of consumption)
– Distribution – physical through channel
– Support activities and firm involvement
• Structure of channel (members)
• Design (Mngt., functions, system, #
of intermediaries, alternatives)
• Intermediaries (Wholesalers,
Retailers)

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 11-2
11-2

Distribution Links
Retailer
Supplier

Producer Consumer

Merchant

Wholesaler

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11-3
Integrated
Integrated Logistics
Logistics Management
Management Model
Model
Figure 18-1: Integrated Logistics Management Model

Operations Finance/ Human Resource Marketing

Accounting Engineering Management and Sales

Integrated Logistics Management

Materials Conversion Physical

Management Operations Distribution

Logistics Activities

Transport Facility Inventory Materials Communications &

Mode Structure Handling Information Management

Service Response Logistics Activities

Waiting Time Capacity Delivery

•Value-adding
SUPPLIERS CUSTOMERS
•Cost minimising
Source: Adapted from the model by David J. Bloomberg and developed from Kenneth C. Williamson, Daniel M. Spitzer
Jr., and David J. Bloomberg. “Modern Logistics Systems: Theory and Practice.” Journal of Business Logistics, Vol. 11,
No. 2, 1990, pp. 65-86.

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 11-4
11-4
Logistics
Logistics Systems
Systems transport
storing
inventory
How much Inventory Costs
Inventory Costs
How long

Nature
of
Logistics
Warehousing
Warehousing Objectives
Objectives
Location: Balance SQ and COD
Central. or Decentral.
Order
Order
Processing
Processing
Use IT to reduce COD
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11-5

Channel Design:

• Management - minimise cost and

max. SQ) - maintain control,
Competitive Advantage
• Functions
• Type of system (vertical, horizontal,
hybrid)
• Number of intermediaries (type of
distribution - Structure)
• Alternatives
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 11-6
Channel
Channel Management
Management
11-6

What conditions determine?

Selecting
Selecting
•Customer needs
•Competition •Develop relationships
•Channel perf

FEEDBACK
•Discounts & allowances
•Marketing support
Motivating
Motivating

•Consumer surveys
Evaluating
Evaluating •Hard data

Kotler  Adam  Brown  Armstrong Principles of Marketing © Copyright 2001 Pearson Education Australia
 11-7
11-7
Marketing
Marketing Channel
Channel Functions
Functions
Data processing &
Risk
Risk Taking
Taking Information
Information scanners

Financing
Financing Promotion
Promotion

Physical
Physical Contact
Contact
Distribution
Distribution

Negotiation
Negotiation Matching
Matching

Kotler  Adam  Brown  Armstrong Principles of Marketing © Copyright 2001 Pearson Education Australia
 11-8
Channel
Channel Organisation:
Organisation: VMS
VMS
11-8

Greater
Same firm owns
Corporate
Corporate production &
placement

Degree
Degree Wholesaler sponsored
of
of Contractual
Direct Contractual Retailer coop
Direct
Control
Control
Franchise

Size & power

Administered
Administered dominate
Lesser Leader in channel

Kotler  Adam  Brown  Armstrong Principles of Marketing © Copyright 2001 Pearson Education Australia
 11-9
Channel
Channel Levels
Levels and
and Channel
Channel Conflict
Conflict
11-9

Consumer
ConsumerMarketing
MarketingChannels
Channels
Channel 1
Direct marketing channel (Dell)
M
M CC
Harvey Norman
Channel 2 Archie Martin
Vertical conflict
M
M RR  CC

Channel 3 Horizontal conflict Small restaurant

M  W
Makro RR  CC
M W

Channel 4 Deals with small retailers - corner store

M
M  W
W  JJ  RR  CC

Kotler  Adam  Brown  Armstrong Principles of Marketing © Copyright 2001 Pearson Education Australia
 11-10
11-10
Channel
Channel Alternatives
Alternatives
TV’s, furniture
and other
Convenience goods high-ticket items
Mass-merchandised Good coverage
Intensive
Intensive Selective
Selective

Channel
Channel
Distribution
Distribution
Strategies
Strategies
Prestige items
Image
•new cars
•luxury goods
Exclusive
Exclusive

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11-11
Goods Rcvg PM1 Goods out
Prod1 R1
PM2
Prod1 PM3 W1 Prod2 R2-4

PM4
•Intensive (P1)
PM1
•Exclusive (P3 > R5)
Prod2 •Selective (P2)
PM2

PM3 Bulk-breaking = larger to smaller

Assorting = Sort as per market needs
PM4 PM = Producer/Manufacturer
W = Wholesaler
PM1 R = Retailer
Prod3
PM2 •Industrial
PM3 •Government
•Institutional
PM4 •Reseller
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 11-12
11-12

What a wholesaler might do

for customers:

• Regroup products - to provide quantity and

assortment customers need (at lowest possible
price)
• Anticipate customers' needs - and buy accordingly
• Carry products in inventory (take onus away from
customer)
• Deliver products promptly and economically
• Provide information and advice
• Provide part of the buying function - make it easy
for customers to buy what they want

Kotler  Adam  Brown  Armstrong Principles of Marketing © Copyright 2001 Pearson Education Australia
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11-13

What a wholesaler might do for

manufacturer/producer

• Provide part of the selling function

• Store inventory (reduce producer's
warehousing costs & unit cost of
production)
• Supply capital - by purchasing
producer's output before it is sold to
final customers
• Provide marketing information

Kotler  Adam  Brown  Armstrong Principles of Marketing © Copyright 2001 Pearson Education Australia
 11-14
Types of wholesalers 11-14

buying
selling
commission Don’t take title

Agent middlemen •Regroup Limited function

Auction companies •Inventory merchant wholesaler
No (agent middlemen) •Sales
Brokers •Delivery Cash-and-carry wholesalers
Commission merchants Drop-shippers
Manufacturers' agents Truck wholesalers
Selling agents Rack jobbers
Mail-order wholesalers
Does the
Some Producers' cooperatives
wholesaler functions
own the
products? •Regroup Service merchant
•Sales
How many •Delivery wholesaler
functions does •Inventory General merchandise
•Credit
wholesalers
Yes (merchant wholesaler) the wholesaler All the
Single-line or general-line
provide? functions
wholesalers
Speciality wholesalers
Basic Marketing, 2nd Australasian ed.
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 11-15
11-15
Wholesalers Key Issues:

• Wholesalers fulfil many of the distribution

and supply tasks for the producer and
consumer
• Serve to shorten time-lag between
production and consumption
• Information carriers
• Organisations need to work closely with
wholesalers to maximise relationship and
reduce VI potential
• Eliminate altogether resulting in fewer
wholesalers

Kotler  Adam  Brown  Armstrong Principles of Marketing © Copyright 2001 Pearson Education Australia
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11-16

Trends in wholesaling

• Fewer, but larger wholesalers

• Use of computers to control
inventory and order processing
• Closer relationships with customers
• More selective in choosing
customers

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11-17
Types
Types of
of Retailers
Retailers Cosmetics (Body shop)
Ties (Tie Rack)
Sporting footwear (Athletes Foot)
•Focus (product) Expanded
Specialty Shops and
•Market scope Assortment Department Stores
• (Size and character) and Service
•Price
•Services
Single- Expanded Supermarkets, Discount
Conven- and Houses, Mass-
Assortment
tional Limited- Merchandisers,
line and/or Reduced Catalog Showrooms,
Offerings
Stores Margins/Service Superstores

Limited target
markets Added Telephone/Mail Order
Convenience Vending Machines
Door-to-Door
Higher Margins Convenience Stores
Less Assortment Electronic Shopping

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11-18

Retail industry structure: Issues

• Large retail stores do most of the

business
• Larger stores enjoy economies of scale
• Corporate chain stores also enjoy scale
economies (Coles Myer, K-Mart etc.)
• Independent retailers form chains (Buying
groups)
– Co-operative chains are retailer sponsored
– Voluntary chains are wholesaler sponsored
• Franchisors form chains too

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11-19

Franchising operations:
• The Franchisor develops a good marketing strategy and the retail
franchise holders (franchisees) carry out the strategy in their own
locations.
• Strong legal contracts govern the relationship (Contractual VMS)
• Franchise sales are growing fast
– $13 billion in sales
– 16,000 franchise holders in Australia and NZ
» Examples:
• McDonalds, KFC, Pizza Hut, Wendy’s Supa Sundaes,
Cobb & Co.
• Cut Price Deli, 7-Eleven
• Midas, Bob Jane T-mart
• LJ Hooker, Century 21
• Sheraton, Hyatt and Holiday Inn
• VIP Lawn Mowing, Drake Personnel
• Video EZ

Kotler  Adam  Brown  Armstrong Principles of Marketing © Copyright 2001 Pearson Education Australia
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11-20

Trends in Retailing:

• Extended trading hours

• More price competition
• Vertical integration
• More & bigger chains and franchises
• More and better information (e.g.,
scanner data, use of EDI)
• In-home shopping
• Non-store retail increase

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11-21
Customer trends:

• less available shopping time (13

hrs per month)
• increased traffic and reduced
infrastructure capacity
• shopping no longer fun activity
• web-based shopping

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11-22
Retailer Opportunities and Threats

• $6.9bn and growing • By 2010 55% shopping

• reduced set-up cost as on-line
technology improves • Bill Gates reckons by
• less floor space 2005 33%
required
• increased competition
• globalisation (potentially global with
• product portfolio 152 web-accessed
extend to consider countries)
global interests
• large retailers set-up
localised distribution
centres

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11-23
Web Retailing

P/M W R C
•by-pass retailer •T&O •ease of access
•enhanced margins •P/M VI •alter store retail •increased choice
•form of VI •distribution kings •products •expert comparison
•greater control •regrouping agents •price •quality products
of marketing •fewer merchants •focus •lower prices
•speed to customer •space •VFM
•lower price •big players rule •ease of payment
•comp. advantage (wal mart) •speedy delivery
•specialty stores @ •no park, crowds
risk •less time
•fewer stores •more entertaining
•local stores become
dist. centres!

Kotler  Adam  Brown  Armstrong Principles of Marketing © Copyright 2001 Pearson Education Australia